arises in economic downturns because of the risk-enhancing investment/financing behavior of firms with a net worth below the …-to-market equity can identify those with large exposure to aggregate risk, and therefore dominates book leverage as a proxy for equity … risk. The numerical analysis of the book-to-market equity effect and financial leverage effect (market or book) on the …

the value of the firm, the correct valuation of this extra-value is controversial. We adopt a risk-neutral approach to …

value (APV). The risk-free rate of interest must be after-tax. Debt capacity depends on the APV and target debt ratio for … the underlying asset, on the option delta and on the amount of risk-free borrowing or lending that would be needed for … follow the tradeoff theory of capital structure will be lower than target ratios for assets in place. Our results can …

measure of TTB, we uncover several facts regarding leverage dynamics that are consistent with this theory and are not easily …

theory model that includes an investment choice, we show that firms which are more exposed to debt overhang issue callable … bonds have covenants attached, the firm is more likely to issue callable bonds. Our empirical findings support the theory …

exogenous. Corporate Finance theory states that the optimisation of investment opportunities is one of three drivers of optimal …